Free Reply - District Court of Colorado - Colorado

Case 1:01-cv-02199-MSK-MEH

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-cv-02199-MSK-MEH MICHAEL E. CLAWSON and JARED L. DILLON, Plaintiffs, vs. MOUNTAIN COAL COMPANY, L.L.C., ARCH WESTERN RESOURCES, L.L.C., and ARCH COAL, INC. Defendants.

DEFENDANTS' REPLY IN SUPPORT OF MOTION FOR APPLICATION OF STATUTORY DAMAGE CAP TO COMPENSATORY DAMAGE AWARDS AND FOR REDUCTION OF ADVISORY BACK PAY AWARDS
Defendants hereby submit their reply in support of their Motion for Application of Statutory Damage Cap to Compensatory Damage Awards and for Reduction of Advisory Back Pay Awards (Dkt. No. 423), filed May 11, 2006. I. A. ARGUMENT

The Appropriate Damage Cap Under 42 U.S.C. §1981a(b) The parties agree that: (1) it is Defendants' burden to show the number of employees for

purposes of application of the damage cap; (2) the relevant time frame is 1998 to 2000; and (3) it is appropriate to submit evidence on such issue after trial, since the jury is not to be informed of the damage caps.

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1.

Plaintiffs' Arguments as to the Eastwood Affidavit Are to No Avail.

Plaintiffs contend that, pursuant to Rule 37, the Eastwood affidavit setting forth the numbers of employees for the years 1998 through 2000 should be disregarded because neither Eastwood nor the information contained in the affidavit was previously disclosed to them. Plaintiffs' attempt to strike the Eastwood affidavit and the information set forth therein based on lack of disclosure and inadmissibility should be rejected. Plaintiffs claim that "[t]he only evidence defendants disclosed regarding the number of employees were the EEO reports." Response at 2. Such is not the case. In fact, Defendants did not "disclose" the EEO reports pursuant to Rule 26(a) as information upon which they intended to rely. Rather, Plaintiffs issued a request for production of documents for the EEO-1 reports and an interrogatory requesting the identity of the person responsible for compiling and filing them. See Request No. 12, Plaintiffs' First Request for Production of Documents, Exhibit A; Interrogatory No. 18, Plaintiff's First Set of Interrogatories, Exhibit B. Defendants never purported to rely on the EEO-1 reports as an accurate reflection of the number of employees of Arch Coal or AWR. In fact, in producing the EEO-1 reports, Defendants took pains to make clear that such reports did not accurately reflect the number of employees at AWR or Arch Coal. Defendants made such clarification by way of the Pat Madras affidavit, Exhibit 4 to Defendants' Motion, as later supplemented by an affidavit from Betty Adkisson, Exhibit C attached hereto. The affidavits make clear that the number of employees as reflected in the EEO-1 reports is not the same as the number actually employed by the entities in question, Arch Coal and AWR, because the EEO-1 reports are required to be prepared by location, rather than by corporate entity. After receiving the affidavits and the various EEO-1 reports, Plaintiffs never

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requested, by way of written discovery or deposition, any additional information on the subject of number of employees. While it is true that Eastwood was not specifically disclosed, as far back as in disclosures from September 2003 and the list of witnesses set forth in the Final Pretrial Order of September 2003, Defendants disclosed their intention to have an Arch Coal employee testify as to the number of employees employed by each of the Defendants. See Defendants' Third Supplemental Disclosure, dated 9/2/03, at 6, attached as Exhibit D; Final Pretrial Order, dated 9/8/03, Defendants' Witness List, Exhibit A at 6 (Docket No. 232). Defendants identified Pat Madras as the corporate representative to testify on such subjects. Again, after such disclosures were made, Plaintiffs made no request to depose Madras or to otherwise conduct written discovery on the subject. At the time the post-trial motions were filed, Eastwood, as the person directly responsible for the information at issue at present, executed the affidavit. Since Plaintiffs had never indicated any interest in conducting discovery concerning the number of employees, despite Defendants' disclosure of Madras and the affidavits making clear that reliance on the EEO-1's was ill-advised, Defendants did not anticipate that providing such information through a different Human Resources official would present an issue. 1 In sum, Plaintiffs' claim that they "relied" on the EEO-1 reports and "did not conduct further discovery based on the fact these reports were all the evidence defendants would use" is Frankly, Ms. Madras could have executed the affidavit, as well. Because no Human Resources officer would simply know, off the top of their head, the exact number of employees for each of the relevant entities during the relevant time frame, anyone providing the affidavit would have to review company data to provide the information, which would have been the same, regardless of who executed the affidavit.
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without basis. The two affidavits make clear that they should not rely on the EEO-1's. Moreover, Defendants' witness disclosures indicating that they intended to have a witness testify as to number of employees clearly demonstrates that the EEO-1 reports were not "all the evidence defendants would use." Nevertheless, at no time from 2003 to the date of trial did Plaintiffs seek any additional discovery on this issue. There is no valid reason they should be afforded such opportunity now. Defendants believe that they complied, or substantially complied, with Rule 26(a). However, even assuming arguendo that they did not, in determining whether a Rule 26(a) violation is justified or harmless, the following factors should be considered: "(1) the prejudice or surprise to the party against whom the testimony is offered; (2) the ability of the party to cure the prejudice; (3) the extent to which introduction of such testimony would disrupt the trial; and (4) the moving party's bad faith or willfulness." Woodworker's Supply, Inc. v. Principal Mutual Life Ins. Co., 170 F.3d 985, 993 (10th Cir. 1999) (affirming district court's finding that allegedly undisclosed damage theory was harmless). See also Trujillo v. Bd. of Ed. of the Albuquerque Public Sch., 230 F.R.D. 657, 660-61 (D.N.M. 2005) (finding failure to produce tapes of conversations harmless where opposing party aware of existence of tapes and did not request details as to contents or copies). To the extent the failure to disclose Eastwood or the information provided in her affidavit constitutes a Rule 26(a) violation, it was harmless, considering Defendants' prior disclosures dating as far back as April and September 2003, as detailed above, and Plaintiffs' lack of interest over the three years leading up to trial in pursuing discovery on the issue. Any prejudice suffered by Plaintiffs at this point is as a result of their own inaction. Cf. Davoll v. Webb, 194 F.3d 1116, 1139 & 1143 (10th Cir. 1999).

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Plaintiffs also contend that Eastwood's testimony as to the number of employees is inadmissible under various rules of evidence. However, courts have held that "an affiant may testify as to the contents of records [he] reviewed in [his] official capacity." See, e.g., Danone Asia PTE, Ltd. v. Happy Dragon Wholesale, Inc., 2006 WL 845573 at *4, n.3 (E.D.N.Y. March 29, 2006) (refusing to strike affidavits from company officials competent to testify about areas within the scope of their responsibilities and based upon records reviewed in official capacity) (citations omitted), attached as Exhibit E. As noted above, it is unlikely that any official providing such information would have personal knowledge of it in the same sense that a fact witness has personal knowledge from witnessing or participating in an occurrence. Rather, any such company official would only obtain such knowledge from reviewing company data. 2 Because Plaintiffs did not pursue additional discovery on the number of employees, they do not have any grounds to contradict the employee numbers provided by Defendants. As made clear by the affidavits, the EEO-1 reports cannot be relied upon as an accurate reflection, which is borne out by a comparison of the figures set forth therein and the numbers provided by Eastwood. The affidavits themselves set forth accurate numbers for a point in time close to when the affidavits and various EEO-1 reports were provided in order to illustrate the point for Plaintiffs. For example, the April 2003 Madras affidavit states that, as of August 31, 2002, Arch Coal had 141 employees, Arch Western had 27 employees, and Mountain Coal had 320 employees (a total of 488, less than the 501-employee threshold). The EEO-1 report for 2002, produced to Plaintiffs at the same time as the Madras affidavit, shows simply a single number at

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Of course, the records themselves would qualify as business records under FRE 803(6).

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the Arch St. Louis, Missouri location of 201 employees. Exhibit F attached hereto. 3 Nevertheless, Plaintiffs made no further inquiry. Plaintiffs also attempt to rely on the deposition testimony of Robert Shanks to contradict the specific numbers provided by Eastwood. Again, such reliance is misplaced. A review of Shanks' testimony clearly demonstrates that he was providing a guess as to the numbers of employees at the time of his deposition in 2002 and relative to 1998 and 1999. See Exhibit 11 to Plaintiff's Response at 21 (using the term "approximately" and stating, as to the total over time, "I would think it's gone down, but I'm not sure."). Finally, Plaintiffs argue that the Court should find that Canyon Fuel was integrated with Arch Western and Mountain Coal and include Canyon Fuel's employees for purposes of the damages cap. At trial, Plaintiffs only presented evidence, and requested that the jury make findings, as to whether Mountain Coal was integrated with Arch Coal and whether Mountain Coal was integrated with Arch Western Resources. Plaintiffs' untimely request that the Court, post-trial, make a finding of integration with Canyon Fuels should be rejected. 4 In any event, Plaintiffs present insufficient actual evidence, as opposed to inference and innuendo, to support such a finding of integration in the relevant time frame, 1998 to 2000. Such a finding requires evidence of (1) interrelation of operations; (2) centralized control of labor relations; (3) common management; and (4) common ownership or financial control. Frank v.

Similarly, the 2004 EEO-1 report for the St. Louis location shows 203 employees. Exhibit G. However, the Adkisson affidavit clarifies that, according to company records, as of January 1, 2005, Arch Coal had 143 employees and Arch Western had 2 employees. Exhibit C at ¶¶2-3. Certainly such a finding should not be made without an evidentiary hearing and, in the unlikely event the Court is willing to consider such request, Defendants specifically request a hearing prior to a ruling.
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U.S. West., Inc., 3 F.3d 1357 (10th Cir. 1993). 5 Plaintiffs' proffered showing does not even come close to satisfying this test. Moreover, Plaintiffs do not present any actual evidence as to the number of employees at the Canyon Fuel. They attempt to rely on deposition testimony of DiClaudio wherein he makes clear that he does not know actual number of employees. See Exhibit 15 to Plaintiff's Response at 13:23-17:22. In fact, in the deposition, in response to DiClaudio's statement that he was unsure as to the real number of employees, Plaintiffs' counsel specifically stated, "Well, I'm not asking you the real number. You understand that, don't you?" Id. at 17:10-15. Although Plaintiffs could have sought discovery with respect to the integration of Canyon Fuel and the number of its employees, they did not do so after Arch Coal and AWR were added as defendants in December 2002. 6 As a result, they should not be permitted to conduct discovery on these issues now. B. The Court Should Reject the Jury's Advisory Verdicts as to Back Pay and Award a Reduced Amount of Back Pay Damages to Plaintiffs Clawson and Dillon. 1. The Expert Witnesses ­ Ron Brennan and Jerome Darnell.

As to the applicable case law and types of relevant evidence on the issue of integrated enterprise, Defendants also refer the Court to Defendants' Memorandum Brief in Support of Motion for Summary Judgment by Defendants Arch Western Resources, LLC and Arch Coal, Inc. (Integrated Enterprise) (Dkt. No. 132), filed April 14, 2003, and Defendants' Reply Memorandum in Support of Motion for Summary Judgment (Dkt. No. 215), filed August 7, 2003.
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To the extent Plaintiffs had any doubt as to Defendants' position on the evidence as to the applicable damage cap and that the total number of employees of Arch Coal, Arch Western, and Mountain Coal would be less than 501, even with a finding of integrated enterprise, Defendants' position was clearly set out in its Trial Brief (Dkt. No. 319), filed April 13, 2005. Even after receipt of such Trial Brief, a year before trial, Plaintiffs did not seek to conduct additional discovery on the number of employees of the named Defendants or the degree of integration with other subsidiaries.

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At a number of places in their Response, Plaintiffs argue that the testimony of their expert witness, Ron Brennan, was more credible than that of Defendants' expert, Jerome Darnell, and that therefore, the Court should adopt the jury's back pay awards, which largely follow (with some adjustments) Brennan's opinions. First, in an effort to prop up Brennan, Plaintiffs note that, at the conclusion of the Daubert/Rule 702 hearing, the Court allowed Brennan to testify concerning his damage opinions. Of course, in so ruling, the Court noted that Brennan's application of his methodology provided "an area fertile for cross-examination." Reporter's Transcript of Court's Ruling (Dkt. No. 384), dated October 31, 2005, p. 10. Plaintiffs theorize that the jury found Brennan credible. Such is not necessarily the case; however, as the jury's back pay damage awards were only advisory in nature, the Court is free to disregard them and reach its own conclusions as to the proper back pay awards in this case. The Court heard at length from Plaintiffs' damages expert, Ron Brennan, both during the Daubert/Rule 702 hearing and at trial. The Court also heard the testimony of Defendants' damages expert, Jerome Darnell, Ph.D. Thus, the Court can certainly make its own determination as to whose calculations are more credible. Defendants are confident that, having done so, the Court will reduce the jury's advisory back pay awards in accordance with Darnell's calculations. 2. Clawson. a. Use of the Miner I Pay Rate.

In addition to mischaracterizing the evidence at trial, Plaintiffs raise a variety of arguments in support of the jury's award of $236,000 in economic damages (lost back pay and

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benefits) to Plaintiff Clawson. Plaintiffs contend that it was appropriate to calculate damages based upon the Miner I pay rate for Clawson, suggesting that, "to the extent the jury's use of the Miner I pay rate is an implicit finding he could have been accommodated as a Miner I, that finding is binding upon the court," citing Smith v. Diffee Ford-Lincoln-Mercury, Inc., 298 F.3d 955, 964-966 (10th Cir. 2002)(jury's findings on legal issues are binding on the court's subsequent equitable determinations). Plaintiffs' argument only serves to highlight the problem with the form of verdict. From the verdict form, we know that the jury believed that Mountain Coal failed to accommodate Clawson, but we do not know what accommodation they thought should have been made. As pointed out in Defendants' Motion at page 6 (and footnote 4), this makes determining damages (as well as reviewing the jury's verdict for sufficiency of the evidence) highly problematic. Further, Plaintiffs' argument that the Court is bound by the jury's "implicit finding" is misplaced. To the extent such "implicit finding" may be discerned from the jury's advisory back pay award (itself, a dubious assumption), the award is just that, merely advisory in nature, and is not binding on the Court. Thus, the holding in Smith is simply inapposite. Plaintiffs also argue that Defendants should be precluded from submitting "new" evidence on the back pay issue. For example, Plaintiffs argue that the Court should not consider Exhibit 723, the summary of Brennan's various reports. Response at 13. Of course, this exhibit is not "new" at all; it was offered and admitted at trial as a demonstrative exhibit, and was used extensively during the cross-examination of Brennan. Similarly, Plaintiffs object to the Court considering Exhibit 725, Darnell's final damages report for Clawson. Response at 16. Again, Exhibit 725 was admitted as a demonstrative exhibit at trial, and Darnell testified at length

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concerning the information reflected in the exhibit. Plaintiffs' argument that Defendants may not both have Darnell testify concerning his opinions and offer the report rings hollow considering that Plaintiffs did exactly that ­ that is, had Brennan testify as to his opinions and offer his final reports into evidence. 7 b. Fringe Benefits.

In their Response, at pages 14-15, Plaintiffs oppose any reduction in the back pay award to Clawson on account of fringe benefits received during 1999 and 2000. Plaintiffs suggest that Defendants have provided no good reason why this information could not have been presented at trial. To the contrary, Defendants have provided a very reasonable explanation. See Motion at p. 9, fn. 8. Such fringe benefits were provided, during 1999, in conjunction with Clawson's receipt of STD benefits, and during 2000, while Clawson's LTD claim was being considered. Both before and during the trial, Plaintiffs vigorously resisted the introduction of any evidence concerning so-called "collateral sources"; having taken such position, they cannot now argue that Defendants somehow waived this argument. Moreover, addressing this collateral source-related issue post-trial is in keeping with the Court's order that any deductions from the damage award attributable to the such collateral sources would be addressed post-trial. Moreover, it is especially telling that Plaintiffs do not respond at all to the substance of Defendants' arguments regarding Clawson's receipt of fringe benefits during 1999 and 2000. In fact, there can be no good response ­ as set out in Defendants' Motion at pages 8-10, Clawson continued to receive his full benefits from Mountain Coal through February 1, 2000 and health

Plaintiffs make the same argument regarding Exhibit 726, Darnell's final damage report for Dillon. Response at 19.

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and life insurance coverage through October 25, 2000, neither of which were taken into account by Brennan in his damage calculations. Thus, if Brennan's damage calculations are to be credited (which they should not), they should be reduced by $21,755. c. Excessiveness of Verdict.

In their Response at 15-16, Plaintiffs argue that the jury's advisory back pay award is not excessive. First, Plaintiffs argue that Brennan's use of 1997 as the most representative year on which to base his calculations was appropriate. Plaintiffs raise several arguments why it was more appropriate for Brennan to use 1997 than 1998. 8 These are nothing more than the post hac justifications of counsel; Brennan himself did not offer any such explanation as to why he used 1997 as a basis for his calculation. Plaintiffs also argue that there was little, if any, evidence presented on the effect the 2000 mine fire had on overtime for employees. The testimony from Pete Wyckoff was that there was little overtime during the 2000 mine fire. The evidence was that Mountain Coal was not hiring employees during this period, but rather was doing everything possible to keep its existing employees busy while the mine was shut down. More importantly, Plaintiffs did not present any evidence regarding levels of overtime actually worked. Nor was there any testimony from Brennan that he attempted to take into account in his damage calculations the decreased amount of overtime work during the 2000 mine fire. Thus, to the extent that Brennan's calculations implicitly assume that regular levels of overtime would have been available during such period,
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Plaintiffs argue that, in 1998, Clawson was injured, missed work, and worked light duty. In fact, Clawson did not injure his back until October 23, 1998, late in the year, and there was no evidence that Clawson missed work on account of his injury. In fact, following his injury, Clawson continued to drive the material hauler, worked on the roof bolter for a short time, and then began his light-duty assignment driving the fuel truck.

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his calculation is overstated. 3. Dillon a. Use of the Miner I Pay Rate.

In attempting to defend the jury's advisory back pay award of $108,000 in favor of Dillon, Plaintiffs grossly mischaracterize the evidence in this case, especially in describing Dillon's restriction as solely a 50-pound lifting restriction. However, as with Clawson, the difficulty in determining the proper measure of damages flows from the inadequacy of the verdict form. Since we do not know what the jury thought the accommodation for Dillon should have been, we can only guess at what his damages should be. See Motion at 6 and fn. 4. b. Excessiveness of the Award.

In their Response, Plaintiffs offer an alternative explanation for the jury's having reduced Brennan's figure of $146,830 to $108,000. While Plaintiffs' theory is somewhat far-fetched, in the end, it is largely irrelevant as the jury's award is merely advisory in nature. Plaintiffs also assert that Brennan gave good reasons for using $49,266 as the starting point for his calculation. 9 Response at 18. In fact, when confronted on cross-examination with his change to the $49,266 figure, Brennan had no good explanation. While Brennan did not say so on the witness stand, it can be seen on the face of Exhibit 721, page 2, that $49,266 was what Dillon actually made at Oxbow Mining in 2002. Brennan took this amount and applied it retroactively at Mountain Coal, starting in 1999, without any apparent basis. Plaintiffs attempt to offer a justification for Brennan's use of this figure. However, once
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As noted in Defendants' Motion at 15-16, Brennan used this figure for the first time in his sixth and final Dillon report, dated April 15, 2006, Ex. 721. In each of his five previous reports, he had used $41,600 as the starting point of his calculations.

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again, this represents counsel's after-the-fact lawyer argument, not an explanation offered by Brennan himself during his testimony. As such, it should be rejected by the Court and any damage award to Dillon reduced accordingly. C. The Court Should Exercise Its Discretion and Offset Clawson's Back Pay Award By Income Replacement Benefits Received By Him. Plaintiffs do not truly dispute that offsets to a back pay award are a matter within the court's discretion. However, in arguing against offset, Plaintiffs wholly ignore the issue of the source of the money and treat all of the income replacement benefits received by Clawson as a "collateral source." Such is not the case. The evidence is undisputed that the short-term disability benefits received by Clawson were not insured and were paid directly by Mountain Coal. Plaintiffs present no actual evidence that Clawson would be required to repay such benefits should he receive his back pay award. As to the remaining monies paid to Clawson, for long-term disability and unemployment, as Plaintiffs note, the issues have been previously fully briefed. II. CONCLUSION

For all the foregoing reasons, Defendants respectfully request that the Court grant the relief requested in Defendants' Motion. III. REQUEST FOR LEAVE TO EXCEED PAGE LIMIT

Defendants apologize to the Court and to Plaintiffs' counsel for exceeding the page limit for motions set forth in MSK Civ. Practice Standard V.A. In retrospect, Defendants probably should have split the initial motion into two, or even three, separate ones, one on application of the damage cap, one on reduction of the back pay award, and one on offsets, rather than combining the issues into one motion of 28 pages. Defendants respectfully request that the Court

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accept the motion, as filed, and accept this reply, which exceeds, by three pages, the 10-page limit. DATED: June 23, 2006.

Respectfully submitted,

s/Jeffrey T. Johnson Jeffrey T. Johnson Monique A. Tuttle HOLLAND & HART LLP 555 Seventeenth Street, Ste. 3200 Post Office Box 8749 Denver, Colorado 80201 Telephone: (303) 295-8000 Facsimile: (303) 295-8261 E-mail: [email protected] [email protected] ATTORNEYS FOR DEFENDANTS

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CERTIFICATE OF SERVICE (CM/ECF)

I hereby certify that on June 23, 2006, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send notification of such filing to the following e-mail addresses: [email protected] [email protected] I am not aware of any non CM/ECF participants in this matter requiring service by other means.

s/Jeffrey T. Johnson Jeffrey T. Johnson Monique A. Tuttle Attorneys for Defendants HOLLAND & HART LLP 555 Seventeenth Street, Ste. 3200 Post Office Box 8749 Denver, Colorado 80201 Telephone: (303) 295-8000 Facsimile: (303) 295-8261 E-mail: [email protected] [email protected]

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